GOIL Annual Report and Financial Statements 2016

In 2009, Diesel XP and Super XP Fuels were introduced onto the market and GOIL Aviation was set up. The Company took advantage of the oil discovery and started delivering Marine Gas Oil (MGO) to supply vessels working for the exploration and production companies and Jet A-1 fuel to helicopters moving to and from the oil rigs.

In 2011, the Company initiated a rebranding exercise by subsequently launching and out-dooring the first rebranded service station at South-La in May 2012. The rebranding campaign was aimed at changing the logo, station-outlook, and most importantly, adopting a new corporate culture dubbed, ‘Good Energy comes with a Smile.’ This was quite an expensive initiative but we firmly believed that it would change the fortunes of the Company.

In 2013, the nation was hit with fuel shortages and the Bulk Distribution Companies (BDCs) resorted to selling on cash basis, with no guarantee of uninterrupted fuel supplies. GOIL in order to secure constant supply of petroleum products to our customers decided to set up a BDC, Goenergy Company Limited (Goenergy) in 2014, to fulfill its petroleum supply requirements.

Dear Shareholders, it is with much pleasure that I wish to inform you that the alliance between BOST/Goenergy and GOIL really worked well in stabilising market prices for the benefit of our cherished customers. We achieved this success without any subsidies from Government contrary to assertions by a section of the industry.

The fact is that government owes GOIL due to supplies to the security services. I am sure if the subsidy story were true, government would rather use the funds to pay up its debts than subsidise a commercial enterprise like GOIL.

In 2015, GOIL also installed a 34m3 containerized Aviation Turbine Kerosene (ATK) tank at the Kumasi Airport to supply fuel to airlines engaged in domestic flights. As part of our strategy to supply MGO for upstream activities, the Company successfully installed and commissioned a 3-storage tank farm of total capacity 3,800m3 at Sekondi Naval Base.

In addition, GOIL on the 5th of April 2017, commissioned a 13,500m3 capacity modern, fully automated 3-tank storage facility at Takoradi Harbour to store and supply MGO to meet the ever increasing demand by supply vessels. The Company also fully rehabilitated a 2,400m3 joint venture MGO storage facility at Tema (Ghana Bunkering Service (GBS)).

When this Board took over in March 2009, our market share was 13.6% as the third largest Oil Marketing Company (OMC), and by December 2016, our market share had risen to 18.2% making GOIL the market leader in Ghana today. This is no mean achievement considering that the number of OMCs have increased from about 10 to 100, over the said period.

Environment

The Economic Outlook

For much of 2016, the government made efforts to cut down on spending in order to reduce fiscal deficit. This resulted in lower than expected growth in Real Gross Domestic Product (Real GDP) which stood at 3.6%. Ghana’s inflation as at December 2016 was 15.4% compared to 17.7% recorded in December 2015. The cedi recorded a cumulative depreciation of 9.6% against the US dollar at the end of 2016. (Source: Ghana’s 2017 Budget Statement).

The Oil Industry

In spite of the decline in the price of crude oil and refined products internationally, fuel prices were relatively high in Ghana due to the introduction of 17.5% special petroleum tax and energy levies in November 2014 as well as the depreciation of the cedi.

Operating and Financial Performance

In the year 2016, the combination of good financial and operating strategies contributed to our Company’s success. This performance was as a result of increase in the number of active retail stations, improvement in service delivery, stringent measures to operate in a safe environment, and last but not least, improved quality control measures.

GOIL achieved 95.8% of its fuel sales target in spite of the tight competition in the industry. Despite a fall of about 5.6% in national consumption of fuel products, the Company grew fuel sales by 9.8% during 2016. LPG sales grew by 30% compared to 2015. Lubricant sales also improved by 11% compared to 2015. GOIL remains the biggest OMC with a market share of 18.2%.

In 2016, the Company undertook a rights issue to raise additional capital of GHS150 million to undertake certain key projects among which are the Takoradi Harbour project mentioned earlier, the construction of a bitumen plant and a lubricant blending plant in Tema.

The Company achieved a turnover of GHS2,645.441 million in 2016 representing a 26.95% increase over 2015. Net profit after tax grew from GHS22.211 million in 2015 to GHS35.256 million in 2016 representing 58.73% increase over 2015.

Our Company also contributed GHS617.072 million, GHS14.742 million and GHS6.037 million as customs, duties and levies, income tax and dividend payment, respectively.

I am delighted to say that the Company’s asset base has grown by over 500% since this Board took over in 2009. GOIL has started an exercise to revalue its landed properties and plant and machinery to establish the true value of these assets. The exercise is on-going.

Dividend

I am pleased to inform Shareholders that the board is recommending a dividend payment of GHS0.025 per share this year.

Challenges

Challenges in the Company’s operations as identified last year, such as impact of high taxes on petroleum products, high interest rates and the new industry regulations that made it difficult to acquire suitable land to construct stations amongst others, persisted.

Operational expenditure went up by 4% compared to the year 2015 due to the increasing cost of maintaining generator sets, fuel dispensing pumps and other equipment.

Cost reduction measures such as introduction of energy saving initiatives like LED lights, automatic price changes both at the pump and signages, electronic archiving and filing system were implemented to reduce operational expenditure.

Health, Safety, Security & Environment

At GOIL we continue to work to keep our employees, contractors and customers safe by focusing on adherence to safety regulations. We have strengthened our safety culture through change management programmes, reinforcing safety rules through display of posters and other capacity building programmes.

We have efficiently used our fuel analysers to test product quality and resolved complaints and enquiries in a timely manner. This has instilled a high level of customer confidence and satisfaction amongst our stakeholders.

International Standard Organisation (ISO) Certification

In 2014, the Company standardized its internal processes and procedures and obtained an ISO Certification. I am pleased to announce that we have again passed the rigorous Quality Management Systems (QMS) audit and have been certified with the latest ISO 9001:2015.

Training

We at GOIL, see training as an essential tool for increasing productivity in the organization. Training at all levels has been keenly considered in the past year as an important incentive capable of spurning employees to put in their best to achieve the organizational goals and objectives.

During the year under review, management members and mid-level managers attended various training programmes organized by reputable institutions within the country and abroad. A large number of employees also received in-house training to bring them up to date on key industry issues.

We believe that in this industry, the nature of work is constantly changing and emerging new technologies require new work skills and continual upgrading which was largely fulfilled during the year.

Intensive training for all dealers and service station attendants were carried out on a quarterly basis. The training centred on health, safety, customer care and product knowledge.

Corporate Social Responsibility (CSR)

Central to GOIL’s good governance policies are corporate social responsibility programmes. The core of GOIL’S Corporate Social Responsibility programmes has therefore been anchored on initiatives, programmes and projects that benefit communities in need.

Water and Sanitation

During the year under review, GOIL continued its community water supply projects by providing potable drinking water to deprived communities across the country. In all, over 40,000 residents in seven communities such as Old Ebo (Central Region), Amoani (Central Region), Kyebi (2) (Eastern Region), Dontieso (Ashanti Region), Gyakiti (2) (Eastern Region), and institutions such as Boso Senior Technical School, Kwanyarko Senior High, Nifa Senior High-Lateh, Amedzofe College of Education and Gyakiti Hospital benefitted from mechanized borehole projects.

Sports Development

GOIL also took the initiative to support sports development by helping to promote the country’s local league through the support of the country’s two biggest traditional clubs- Asante Kotoko FC and Hearts Of Oak FC.

Health

Again as part of its corporate social responsibility, GOIL donated a Toyota Hiace bus to the Ghana National Blood Service at the Korle-Bu Teaching Hospital to support its daily operations. Management, staff and service station attendants also donated blood to store up the depleting stock of the National Blood Bank.

GOIL has procured 1,200 hospital beds for distribution to Regional and District Government Hospitals to help solve the lack of beds for In-patients. Institutions such as the Kaneshie Secondary Technical and homes such as the ‘Village of Hope’ orphanage amongst others were also supported in their activities in 2016.

Corporate Governance

The driving force of our Company is to guarantee fairness for every stakeholder. We therefore believe corporate governance practices are critical to heighten and maintain investor trust.

Our Board thus exercises its fiduciary responsibilities in the widest sense of the term. Board meetings are conducted regularly as well as emergency meetings to consider corporate issues requiring approvals and ratification of the Board. The Board is assisted by the Apex Committee and the Operations & Marketing Committee which meet to make recommendations to the Board.

Future Prospects

The Company sees a number of growth opportunities on the horizon. GOIL will continue to acquire infrastructure and technology to improve sales in all its existing businesses.

GOIL will pursue its product diversification strategy. The year 2017 will see the construction of a bitumen plant in Tema. The Company considers this project vital since access to bitumen by road contractors will be made easier when the plant becomes operational.

GOIL will continue to partner with other companies to fully utilize our station forecourts thus increasing other income for all cherished Shareholders.

Awards and Recognitions

In 2016, our Company won the following awards:

Chartered Institute of Marketing Ghana (CIMG) Petroleum Company of the Year – 2015;